PUBLISHED ONFebruary 16, 2024 3:50 AM
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Many Homeowners are coming across a video or an article online about paying off a 30 year mortgage with a HELOC. The concept has many names such as velocity banking or Accelerated Banking. For clarity, this article will to refer to this concept as Accelerated Banking. Let’s fully unpack the truth about this concept. Let’s find out if using a HELOC can help pay off a mortgage faster. Readers will also learn where this concept originates and see if it actually does save money and time.
Unpacking the Accelerated Banking Strategy
The Accelerated Banking strategy advocates using a HELOC to pay down a mortgage faster than the traditional way. This, in turn, potentially saves homeowners thousands in interest and years.
The strategy involves obtaining a HELOC which is a revolving and open-ended credit – unlike a mortgage. Revolving credit is a type of loan that allows a borrower to pay back and borrow over and over again - similar to a credit card. From there, the strategy suggests a homeowner will use the HELOC to pay large chunks of the principal mortgage balance. By doing so, the overall interest paid over the life of the mortgage is reduced, and the payoff period is shortened. It accelerates the amortization schedule.
From there, the homeowner now has a balance on their HELOC. However, because of the revolving nature of the HELOC, the homeowner can deposit most, if not all, of their paychecks directly into the HELOC. This causes the daily interest to decrease while allowing the user to take draws out of the HELOC for their life expenses. By doing so – the homeowner can decrease the HELOC’s average daily balance which means less interest they pay.
Like other lines of credit, the HELOC interest is calculated using daily interest. Meaning, that the interest is calculated at a daily level. If the balance changes from day to day, the interest amount also varies. While some may argue that mortgages, too, are calculated similarly. However, it’s the revolving nature of the line of credit that makes Accelerated Banking work.
Say a homeowner’s balance is $10,000 today. That homeowner will pay an interest amount correlated to the $10,000 balance. But let's say the homeowner’s balance decreases to $9,000 tomorrow. That means the homeowner pay less interest tomorrow due to the balance reduction and so on. So by using all of the paycheck to reduce the HELOC balance and delay any draws, the HELOC accrues less interest cost.
For visual explanation, here’s an explainer video on YouTube:
Where Does This Concept Come From? Who Invented It?
The concept of Accelerated Banking is not a new trend. It's been introduced to homeowners in the U.S. for almost two decades. The concept ultimately mirrors the idea of an "Offset Mortgage". In countries like the UK, Australia, and New Zealand, offset mortgages are a common financial tool. The Offset mortgage combines a mortgage and a savings account. The savings balance offsetting the mortgage balance, it reduces the interest calculated. In other words, homeowners depositing funds to their savings account reduces the interest on their mortgage. It's a very clever concept. The Accelerated Banking strategy is a tailored version of this concept. Homeowners in the UK, New Zealand, and Australia have been using offset mortgages for decades now.
Unfortunately, offset mortgages do not exist in the United States. Hence, companies like Accelerated Banking found a way to recreate the concept using a HELOC. Just like an offset mortgage, a homeowner can deposit their paychecks directly into the HELOC. By doing so, it 'offsets' the interest cost on the HELOC by reducing the daily balance. All the while, the homeowner still have access to the funds from the HELOC at any time.
The Homeowners Who Are Using It
As many homeowners research the Accelerated Banking method, they wonder, 'Has anyone used this concept?'.
To some, the concept sounds good on paper. So let’s see if there’s a real life result behind this concept.
On Accelerated Banking's Trustpilot review profile, readers will find common success stories such as this.
To Learn More
There are plenty of resources that Accelerated Banking offers. One resource is a complimentary 1-hour seminar that explains the concept in great detail. This session delves into the nuances of the method and provides actionable insights for homeowners. Readers can access that resource here:
Conclusion
The Accelerated Banking strategy stands as a testament to financial innovation and adaptability. The concept borrows ideas from tried-and-true international banking products. It's applying them within the U.S. financial landscape. The strategy offers a credible and effective path to mortgage freedom. As with any financial decision, due diligence and personalized advice are key. Please remember that Accelerated Banking is not for everyone. It does require some level of patience and discipline. But there are great companies, like Accelerated Banking, that offer tools and support.
Contact Info:
Name: Sam Kwak
Email: Send Email
Organization: Accelerated Banking
Website: https://home.acceleratedbanking.com
Release ID: 89121182
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